MAYURDHWAJSINHJI vs. COMMISSIONER OF WEALTH-TAX

WTR/47/1985HC GujaratGJHC24012583198504 September 2001Author: HONOURABLE MR. JUSTICE MOHIT S. SHAH,HONOURABLE MR. JUSTICE D.A.MEHTA6 pages
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What did the High Court hold?

The High Court answered the first question in the negative, in favour of the assessee. The Court noted that while the Bombay High Court had previously held the property includible under Section 4(6) of the Wealth-tax Act from 1.4.1965 due to an artificial inclusion by the legislature, this court's decision in Pratapsinhji N. Desai was rendered subsequently. In Pratapsinhji, this court held that customs or usages enjoining devolution on a single heir are not effective unless saved by Section 5(ii) of the Hindu Successions Act, 1956. The covenant for Darbargadh stated legal title vested with the Dynasty and the property was inalienable and impartible. However, the court found that this did not mean the property devolved upon a single heir as required by Section 5(ii) of the Hindu Successions Act. Consequently, the property lost its characteristic of being an impartible estate by operation of Section 4 of the Hindu Successions Act, 1956, and thus did not fulfil the description for Section 4(6) of the Wealth-tax Act. The Tribunal was therefore not right in holding Darbargadh as an impartible estate and the assessee as its holder under Section 4(6). As a result of answering the first question in favour of the assessee, the second question was rendered unnecessary and declined to be answered.

What were the facts?

The assessee, an individual, claimed that the value of 'Darbargadh City Palace' should not be included in his net wealth for assessment years 1966-67 to 1971-72. He contended that the property belonged to the family, not him individually, based on a covenant with the Government of the United States of Kathiawar. The Wealth Tax Officer disagreed and included the property's value. The Commissioner (Appeals) followed a previous Tribunal decision and excluded the property. The Revenue appealed to the Tribunal, which, by order dated 29.12.1980, held that the property was an impartible estate and its value should be included in the assessee's net wealth, relying on a Bombay High Court decision in the assessee's own case for earlier assessment years.

What were the issues?

1. Whether, on the facts and in the circumstances, the Tribunal was right in law in holding that Darbargadh was an impartible estate and that the assessee was the holder of that estate under Section 4(6) of the Wealth-tax Act? - Assessee's contention: The assessee argued that the property was held by the Hindu Undivided Family (HUF) and not by him as an individual. He relied on Section 4 read with Section 5(ii) of the Hindu Successions Act, 1956, and the decision in Pratapsinhji N. Desai vs. CIT, 139 ITR 77, stating the covenant did not relate to an estate descending to a single heir, thus Section 4(6) was inapplicable. - Revenue's contention: The revenue supported the Tribunal's order, citing the Bombay High Court's decision in the assessee's own case (CWT vs. H.H. Maharaja Mayurdhwaj Singhji, 136 ITR 279). They argued the property was impartible, received as sovereign property, and Section 4(6) applied as a legal fiction. They also referred to Pratap Singh vs. Sarojini Devi, 1994 Supp.(1) SCC 734, regarding the continuation of primogeniture. 2. Whether, on the facts and in the circumstances, the Tribunal was right in law in directing the Wealth-tax Officer to include the same value of Darbargadh in the total wealth of the assessee when the valuation is under challenge by the assessee?

Which sections of the Income-tax Act were involved?

Section 4(6),Section 5(ii),Section 4,Section 27(ii)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

WEALTH TAX REFERENCE No 47 of 1985

For Approval and Signature:

Hon'ble MR.JUSTICE M.S.SHAH and Hon'ble MR.JUSTICE D.A.MEHTA

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO --------------------------------------------

The order continues below.

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